A change has happened for mortgages on investment properties and second homes. Fannie Mae and Freddie Mac, companies chartered by Congress to purchase mortgages from financial institutions and repackage them for investors, just made it more difficult and expensive for lenders to offer mortgages on these types of properties.
In a nutshell, Fannie and Freddie basically said they are cutting back on the number of loans they will accept for investment properties and second homes. Many lenders have adjusted to these limits by pricing these loans so high that borrowers are finding that the return on investment doesn’t work out. For example, lenders are adding a premium to the pricing, which can now cost a borrower 4 to 5 discount points just to get a decent mortgage loan rate. Some loans like cash-out refinancing on investment properties are virtually impossible in New Mexico since they become high-cost mortgages and these are not allowed.
Once the cost of the mortgage goes too high, the state says no way to that financing. Indigo Mortgage still has a couple of lenders who have not raised the premium on pricing and we have been able to get a few second homes and investment properties financed at a reasonable rate. This is definitely the time to shop an investment or second home mortgage around, as you might see huge differences in pricing.